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Peter Carrescia: [Full interview transcript]

Peter Carrescia is a venture capitalist specializing in technology and media investments. He spent more than a decade at VenGrowth, leading investments in a wide variety of software and digital products. Read Peter’s full bio here…

Peter: I’m a venture capitalist. I like to talk about what I like to refer to as the three T’s: technology, team, and timing. And based on where a company is in its stage, they require different amounts of each of those. At a very early-stage company, just two or four people, team is very, very important. It would be the vast majority of what you’re looking at. Are they smart people? Do they listen? Not just to their (venture capital) but to the market, to their customers, to the feedback they’re getting as they’re developing a product. Technology is a component of it also, and then timing too.

As companies evolve, the team isn’t necessarily as important as maybe the technology, and then, near the end, there’s a point where timing is everything. Probably the most important thing in venture capital is timing, getting exactly the right product at exactly the right time.

Ramona: You’re assigning value to things that in some senses have no inherent value. It’s not the roof over our heads, it’s not the food that we eat. So what are the metrics that you’re looking at? I know you said the timing, the team, the technology…

Peter: It does actually come down to how much money you can generate at some point in the future and that’s an analysis that you have to do right up front. There’s some things that are very obvious that you can build and sell for money. In software, for instance, Microsoft Office is an example of something that has always been sold for money. It’s very obvious how much money you can make for that. Something like Instagram or Facebook, it’s less obvious how you monetize something like that. It could be advertising, it could be using data generated by how a user behaves on the website and then using that data to target offers to the user, or to sell them other things. But at the end of the day, that (value) calculation is always being done, regardless of the kind of solution that it is.

Ramona: How do these massive valuations of digital properties impact our sense of value for, let’s say, real world things?

Peter: That’s a good question. Especially when there’s things like Instagram, which is an outlier, but right now there’s certainly a disconnect between the startup community, for instance, and people that are taking a longer-term approach. Because they’re looking at that, and saying, “this is the new normal.” And then there’s people on the other side that say, “that is an outlier, and unlikely to be repeated again in a short period of time.” You’ll often see those kind of transactions happen, but like once every five years. They’re not made on a regular basis.

Ramona: Technology is one area that isn’t impacted by economic downturn. In fact, it seems to be fostered by economic downturn. What is the relation between technology and the economy that way?

Peter: It’s a very good question, and one I’ve thought about quite a bit over quite a few years. It’s interesting, a lot of people do correlate economic activity with technological innovation. It often works the other way around. A technological innovation typically drives economic growth in the years that follow it, because of the ability to dramatically improve productivity. That’s typically what you’ve seen. A technical innovation will drive economic activity at some point after the initial invention of the technology.

Summary:

Corporate success depends on timing, team, and technology

Valuations of new web properties (e.g. Instagram) is challenging

Hard to say how valuations of digital property is effecting value of real-world assets